Prospects

An iconic billboard in the quintessential boom city of Shenzhen features Deng’s famous statement that China's “basic line will not waver for 100 years.” If Deng was right, we are less than one-third of the way into the era of “reform and opening.” But four challenges identified by Premier Wen Jiabao in 2010, that growth becomes “unbalanced, unstable, uncoordinated, or unsustainable,” threaten the boom. The key to balance lies in increasing the consumer share of GDP, allowing China to create a modern consumer economy. Stability will depend on the government's ability to address grievances as the gap between winners and losers widens. Coordination is the great test facing the ruling Communist Party, of whether it can manage the politics of growth without fundamental changes to the system. Sustainability is an issue that has global implications, as citizens of a warming planet watch anxiously to see if China is successful in greening the boom. The fifth great challenge, left out by Premier Wen, may be the external one: whether the world is successful in making room for China.

China Still Has Many Places to Develop

China is a Maturing Dancer

Reform Transformed the Countryside

US and China Are in the Same Boat

China is Like a Raft in Category 5 White Water

Stephen Roach

Chairman, Morgan Stanley Asia

Stephen S. Roach is chairman of Morgan Stanley Asia, a leading global financial services firm. Previously, he was managing director and chief economist of Morgan Stanley. Before joining Morgan Stanley in 1982, Roach was vice president for economic analysis for the Morgan Guaranty Trust Company in New York. He also served on the research staff of the Federal Reserve Board in Washington, D.C. from 1972-79, where he supervised the preparation of the official Federal Reserve projections of the U.S. economy. Prior to that, he was a research fellow at the Brookings Institution in Washington, DC.

Roach is widely recognized as one of Wall Street’s most influential economists. His research covers a broad range of topics, with recent emphasis on globalization, the emergence of China, productivity and the macro paybacks of information technology. His work has appeared in academic journals, books, congressional testimony and on the op-ed pages of The Financial Times, The New York Times, The Washington Post and The Wall Street Journal. Roach holds a Ph.D. in Economics from New York University and a BA in Economics from the University of Wisconsin.

Look, I think the endgame is pretty clear. The question is: When? The day will come when China is a truly market-based, increasingly privately owned system. And it's very difficult to believe that a system like that could exist in a one-party political structure. I think as China evolves, especially as it brings that "consumer piece" into the equation -- and associated with that will be expanded aspirations of its population: more personal freedom to buy goods and services made and provided at home, as well as those provided through off-shore producers and vendors. With that personal freedom that comes with more of a consumer-led model, I think the political reform process will, most likely, accelerate. So in these first 30 years, where there's been a lot of state-owned enterprise reform, but the growth model has been focused so much on exports and export-led investment, that's not the strain of growth that necessarily requires a different political model. The next phase though, certainly suggests that adjustments in the political system would be increasingly inevitable.